Record Numbers in Employment

Unemployment fell by 50,000 in the recent quarter, the Office of National Statistics has said, adding further weight to suggestions that the UK economy is set to return to growth. The number in employment has risen to a record high figure of 30 million, while the unemployment rate has fallen to 7.9%, the lowest since early last year. The government has praised the private sector, which, it said, is continuing to create opportunities.

Inflation Drops to 2.2% in September

The rate of inflation fell to 2.2% in September, it was announced this week, offering further good news for the economy. This has increased the number of savings accounts and ISAs that offer real term gains after tax. It also brings price inflation much closer into line with wage inflation, which means that the squeeze in living standards may be beginning to ease. However, not all are set to gain from the fall; benefits, tax credits and pensions, which are typically set by the inflation level in September, are expected to rise by less next April.

Ofgem Unveils New Strategy For Energy Prices

The energy regulator, Ofgem, has unveiled new proposals that would force energy suppliers to inform customers about the cheapest tariffs they have available. Ofgem hopes to bring an end to a system that sees hundreds of tariffs at different prices, which makes it difficult for customers to work out the best deals to suit their needs. The regulator’s chief executive, Alistair Buchanan, said that consumers needed a “simpler, cleaner, fairer and more competitive energy market”.

Star-Broke? Anger as Starbucks Post Losses to Avoid Tax

And finally, there has been a furious reaction after it was revealed that coffee giant Starbucks has paid remarkably little tax on its UK earnings. The firm has used a number of creative measures, including the payment of royalties to other divisions, to post a £33 million loss in its latest financial year. This allows it to eschew corporation tax on profit. Figures show that the firm has only paid £8.6 million in 14 years despite making over £3 billion from UK coffee lovers during that period.

Barclays Acquires ING Direct UK

Barclays has agreed a deal to buy ING Direct UK, and will take on its deposits and its £5.6 million mortgage book next year. 1.5 million UK customers will transfer to Barclays, as well as 750 employees of the Dutch bank. ING Direct has been a strong competitor in the market for savings accounts in recent years, and the takeover raises concerns about the lack of competition for consumers while savings rates continue to fall.

OFT Investigates 68 Payday Lenders

The Office of Fair Trading visited 68 payday lenders in the first half of 2012, investigating concerns that firms were taking advantage of the financially vulnerable. The OFT used a formal power of entry request to assess the lenders, checking to see whether they were handing out loans without suitable checks and whether they were rolling over loans at massive rates of interest to those unable to repay them. The OFT has already revoked the credit licenses of Yes Loans and MCO Capital so far this year.

Tesco Reveals Current Account Loyalty Scheme

Tesco has spoken up about its new much-anticipated current account this week, as it prepares to rub shoulders with the UK’s big banks. The supermarket says that the new account will be linked to the company’s Clubcard loyalty scheme, and that points would be available for use of the account’s debit card. The head of Tesco Bank, Benny Higgins, said that he could not confirm whether or not the account would be free, but he promised transparency as a cornerstone of its new banking service.

British Gas Announces 6% Rise in Prices from November

And finally, British Gas has announced a rise of 6% on its gas and electricity prices with effect from mid-November. The company said that it accepted the rise was an “unwelcome” piece of news for customers, but said that the price rises were necessary owing to higher wholesale prices and the costs of upgrading the national grid. It also said that with the North Sea supply running out, the company had to pay the going rate for gas, and that the price was outside of its control. The increase is expected to add £80 to the average dual fuel bill per year.

October Sees Minimum Wage and Tax Changes

Changes to the minimum wage and VAT came into effect at the beginning of October. Those over the age of 21 saw a small rise in the minimum wage, to £6.19 per hour. The rate for under-21s remains frozen, though there was a marginal rise for apprentices. Meanwhile, amendments to the infamous pasty tax mean that food which is intended to be served hot or which is kept hot by a specific heating unit will now be liable for VAT. Supermarkets have criticised the decision, saying that many families will be forced to reconsider purchasing freshly cooked food if the price rises by 20%.

Bank of England Defends ‘Funding for Lending’ Scheme

The Bank of England has been forced to defend its Funding for Lending scheme after figures revealed that consumers were borrowing less, not more. New loans to households fell by £400 million, the Bank revealed, despite the launch of the scheme which was designed to cut the cost of mortgages. Paul Fisher, head of financial markets at the Bank of England, said that it will be impossible to judge the effectiveness of the scheme before the end of the calendar year.

Chancellor Urged to Boost Cash ISA Limit

The Chancellor has been urged to boost the cash ISA limit to improve conditions for savers. Though adults can currently save up to £11,280 tax-free every year, only half of that limit can currently be saved in cash. With rates on savings accounts tumbling, the Chancellor is being asked to increase the cash ISA limit to allow consumers to protect their savings from tax without having to resort to riskier options.

House Prices Fall for Third Consecutive Month

House prices fell in September for the third consecutive month, according to the Halifax. The society’s house price index said that prices fell by 0.4% between August and September, to just under £160,000. Halifax attributed this fall to the weak economic climate, and predicted that house prices would remain broadly unchanged over the rest of the year.

Co-Operative Bank Chooses Ethical Route to Staff Pay

And finally, the Co-operative Bank has ditched its sales-driven rewards for staff in favour of a scheme that rewards customer service. The move comes after the Financial Services Authority criticised British banks for their aggressive hard-selling mentality, where desperate branch staff are made to sell lucrative products to consumers that they don’t need. The Co-op had previously linked 3% of basic pay to sales performance, but it now says that it will reward staff for customer service at its best performing branches.

Recession Less Severe than Expected

A revision to UK growth figures suggests that the recession is not as bad as first feared. The Office of National Statistics has revised its estimate of second quarter contraction to 0.4%, after initially stating that the economy had shrunk by 0.7% from the first quarter. The revision owes largely to more optimistic figures from the construction sector, which has been the main downwards drag on the economy.

Young Generation Saving More Despite Recession

Consumers are managing to save more despite the on-going economic difficulties. Figures from the state-run National Savings & Investments show that consumers saved an average of £90 per month into a savings account during the last quarter. Surprisingly, the younger generation are managing to save more, with 25-34 year olds saving well above the average.

Santander 123 Credit Card Now Includes 3% Cashback on Rail Travel

Santander has added a new feature to its 123 credit card to include 3% cashback on train fares. The cashback offer applies to National Rail and Transport for London, and includes London bus and tube travel. The card currently offers 1% cashback on supermarket shopping, 2% at department stores, and 3% on petrol. The move is likely to be welcomed by rail commuters, especially with fares set to rise by at least 6% in the New Year.

Banks Forced to Switch Current Accounts in 7 Days

New regulations will force banks to switch customers’ current accounts within seven days. The new rules, which come into effect from September 2013, are designed to make the switching process much easier for consumers and boost competition in the market for current accounts. Around 9% of those who transferred last year found the process error-ridden or overcomplicated. Both the government and regulators are keen that people should be able to swap their bank accounts conveniently.

Building Societies Growing as Trust in Banks Falls

A recent survey shows that only a quarter of people believe that their banks care about their best interests. And it is now thought that building societies could end up replacing banks as the main regional lenders. Financial services firm KMPG said that half of the 47 building societies it had analysed were showing clear signs of profitability. The societies’ customer assets have also increased, as disgruntled consumers have turned away from bank and towards institutions that have remained clear of the mis-selling scandals.

Lloyds TSB Practices Exposed

And another scandal has struck high-street banks this week, threatening to dent public trust in banks even further. Just days after Lloyds’ chief executive criticised the bonus-led banking culture in the UK, staff at the bank revealed how an aggressive sales culture and commission-based pay structure was forcing them into acting against customers’ best interests. The Financial Services Authority, which regulates banks in the UK, said it was down to institutions themselves to amend such poor practice, but that it was ready to enforce any changes it thought necessary.

Brits Turn to Expensive Credit to Pay Essential Bills

Millions of Brits are turning to expensive forms of credit to pay off their essential household bills. Though the overall level of unsecured credit is falling, a study by Santander suggests that 15% of people are drawing an average of £172 on their credit cards every month. 2% of people are relying on payday loans, which can command an annual interest rate of over 4,000%. Santander suggests that paying bills as soon as possible after payday could avoid expensive additional borrowing. It also recommends checking price-comparison sites, such as Which4U, for better deals on domestic bills such as gas and electricity.

‘Direct’ Mortgage Approach Not Convincing

And finally: More people are pursuing mortgages ‘directly’ – that is, in person or through speaking to their bank – but the majority are not convinced that they have found the best offer through this approach. A survey of almost 1,700 borrowers revealed that only a third believed that they had conducted a thorough enough search to ensure they had found the best deal for them. The number of new mortgages advanced in August was down by 8% on the previous year, figures reveal. But the number of first-time buyer deals is slowly beginning to increase as the government’s Funding for Lending scheme begins to make its impact felt.

Consumer Reliance on Credit Card Debt is Falling

Credit cards are being paid off a faster rate, says the Bank of England, as consumers show signs of being more responsible with their plastic. Net lending figures showed that £147 million was paid back in July, the highest monthly repayment in six years. Consumer credit levels have fallen by over 11% in the last two years, as people continue to steer away from unsecured debt.

TUC Humilates Government Over Tax Avoidance

The Trade Union Congress published a spoof magazine this week, designed to humiliate the government into closing the loopholes that allow the wealthy to avoid paying tax. The provocatively titled ‘Kerching: A Celebrity Guide to Tax Dodging’ shows how individuals and companies can avoid tax through offshore trusts and non-domicile arrangements. Its list of recommendations include a ‘general anti-avoidance principle’ that would allow a clampdown on all such practices. However, the pamphlet was keen to distinguish these manipulative practices from legally approved measures, such as saving into tax-free ISAs.

Government Announces More Support for First-Time Buyers

The Government has announced plans to help over 16,000 first-time buyers get onto the property ladder. The NewBuy scheme, which encourages lenders to provide mortgages at a low deposit, is to receive a £280 million extension, which it is hoped will help to rejuvenate the stagnant housing market. House prices fell between July and August, says the Halifax Building Society, and there is said to be little sign of an improvement in the months ahead.

Santander Reverses Decision on Business Bank Accounts

And finally: thousands of angry Santander customers have won the day after the bank decided not to impose charges on business bank accounts. The bank had planned to upgrade free business banking customers to accounts costing from £7.50 per month, but it was immediately accused of going back on a guarantee of “free banking forever”. Santander claims that it made the decision based on feedback from customers who preferred the idea of paying a monthly fee for more options, but it has now conceded that it will remain an option rather than a necessity for its 230,000 small business customers.

The boss of one of Britain's leading challenger banks has called for further measures to make current account switching simpler, amid concerns that momentum is being lost in the battle for market share.